Watching the bulk of your business practically disappear might be the final
straw for many entrepreneurs, but to Robert Shepherd it was a lucrative new
opportunity.
Six years ago he was running an export company that sold secondhand white
goods in Africa and supplied products such as HP Sauce. While on a trip to
Senegal, he realised that under an EU environmental directive, the firm
would no longer be able to export fridges. “We lost a million pounds
overnight,” he recalls.
The directive, aimed at protecting the ozone layer from CFC gases widely used
as coolants, meant there were many thousands of old fridges in the UK that
could not be thrown away like ordinary rubbish or sold secondhand. Shepherd
saw the business potential in the urgent need for recycling facilities and
created the Global Environmental Recycling Company with capital from his
export operation.
He commissioned his own plant, capable of recycling 99% of each fridge, but
the business boom was short-lived. “We knew that prices were going to
plummet,” says Shepherd, 53. “We used to be paid £15-£20 for each fridge we
handled but now you get basically nothing to recycle a fridge, so you have
got to live off the materials produced from it.”
Another EU directive encouraged him to move onto televisions. The waste
electrical and electronic equipment (WEEE) regulations, which came into
force in the UK last year, made manufacturers responsible for disposing of
old TVs, radios, computers and so on in an environmentally friendly way.
Recycling TV sets is harder than dealing with aluminium cans and plastic
bottles. “Televisions are probably one of the most difficult products to
recycle,” says Shepherd. “You’ve got different materials such as plastic and
copper, and you’ve got two types of glass bonded together.”
He commissioned an automatic processing plant to handle the high-labour,
high-intensity work of stripping down TVs. The machine processes 400 at a
time, extracting the raw materials as they move along a conveyor belt. It is
manned by just four staff, who pick out the large components.
Manufacturers have to join a compliance scheme, monitored by the Environment
Agency, which collects the electrical waste on their behalf and takes it to
recycling facilities such as Global. The firm’s income comes from the
manufacturers and also from the reclaimed raw materials.
The recycling industry is tightly regulated and Shepherd has to give the
agency quarterly reports on what goes into and out of the Merseyside plant.
“It’s all traceable,” he says. “If I take 100,000 TVs in, I’ve got to know
what the average weight of all the components is and I have to report our
outgoing product to the agency.”
While the process uses energy, there are energy-saving benefits from
recycling: for example, recycling aluminium saves 95% of the energy of
making it from scratch, while recycling glass saves 25%.
Global is funded by private capital and a flexible credit facility from Bank
of Scotland Corporate, as Shepherd says the burden of red tape discourages
him from getting government grants. The business has 60 staff, handles 2m
televisions annually and turns over £1.2m a year. It is about to move from
Birkenhead to a larger, 14-acre site in Ellesmere Port so that it can handle
the greater volumes expected with the switch to digital television by 2012.
Most recyclers can extract only the wire and copper from televisions, not the
glass, and this is where Global sees its competitive advantage. “We can
recycle 100% of the television,” claims Shepherd. “There is no waste.”
Recycling businesses have, however, seen the resale prices of raw materials
plummet recently. Shepherd says steel dropped from £280 a ton to £35,
plastic fell £100 a ton and copper £1,500 a ton.
Global has some cushion thanks to a 12-month fixed contract to supply glass to
the consumer-electronics group Samsung, and Shepherd is being creative with
the raw materials. Plastics are ground into pellets and used to make
motorway cones, and crushed glass decorates a range of concrete garden
furniture. Global exhibited the furniture at a show at the NEC, Birmingham,
recently and, according to Shepherd, “people were going crazy about the
sparkle effect”.
Diversifying into production is a financial must, he says. “That’s the future
of recycling. Unless you can make good profits from that, you won’t be able
to make a living. A lot of recycling companies will go bankrupt next year.”
Alastair Donald, area director commercial business, Liverpool, at Bank of
Scotland Corporate, says that Global is continuing a long history of
recycling in the northwest. “There has always been a scrap-metal market so
it’s a natural add-on to the traditional recycling businesses that have been
here for many years.”
The challenge for banks is to find companies where the business dynamics are
easily illustrated, he adds. “Recycling televisions is a good example where
you can identify where the televisions are coming from and whether the
business does what it says it can, namely splitting out the glass and copper
so it can be sold,” says Donald. “It is all very identifiable and we look at
it as any other business: is there a market, can it generate cash and make a
profit?”
